Regional Brief

Overview

Growth in the World Bank’s active partner countries in the East Asia and Pacific region accelerated from 9.2 percent in 2005 to 9.8 percent in 2006. The most rapidly growing country in the region is China, which grew 10.7 percent in 2006—the fourth consecutive year it has grown more than 10 percent. Cambodia, Lao PDR, Mongolia and Vietnam also grew rapidly, increasing their output by 7.5-10.5 percent. Indonesia, Malaysia, the Philippines, and Thailand grew at more moderate but still healthy annual rates of 5-6 percent. Papua New Guinea and some of the Pacific Islands also saw a pickup in growth, in part the result of higher commodity prices. Political or civil unrest undermined the outlook in Timor-Leste and Tonga.

Poverty continued to decline in the region, with the number of people living on less than $2 a day falling to 550 million in 2006, or less than 30 percent of the region’s population. Since 2001, the number of people living below the $2-a-day line has been reduced by some 225 million, an even larger reduction than in the previous “boom” of 1991-96.

Almost everyone in developing East Asia will be living in a middle-income country in a few years as a result of the growth spurred by recent global and regional integration. The new Asia is already more innovative and networked than just five years ago– it’s characterized by a very competitive business environment that encourages new products and processes and a labor force able to absorb new ideas. But the development challenge at the middle-income level is considerably more complex and countries need to adapt their strategies.

Regional flows of goods, finance, and technology are helping even smaller East Asian countries reap the benefits of economies of scale, and this regional integration must be encouraged.  But these measures have to be supported by actions at the domestic level to ease the stresses and strains that rapid economic growth leaves in its wake. Foremost in this agenda is the need to build vibrant cities, cohesive societies, and clean governments.

World Bank Assistance

The Bank’s strategy for the region aims to support broad-based economic growth, promote higher levels of trade and integration within the region and with the global economy, enhance the environment for governance at both national and sub-national levels, increase social stability, and achieve the 2015 Millennium Development Goals.

To meet these goals, the Bank approved $4 billion for the region in fiscal year 2007, including $2.8 billion in IBRD loans and $1.2 billion in IDA credits and grants. Carbon Finance contracts totaling $29 million were signed in 2007.

Improving Governance and the Climate for Investment

Ground-breaking work on improving governance and fighting corruption continues in the East Asia and the Pacific region, with an emphasis on building country capacity and strengthening public institutions. A $600 million development policy loan to Indonesia is allowing government to deepen reforms in four main areas: macroeconomic stability and creditworthiness, public financial management and governance, the investment climate, and services for the poor. In the Philippines, a $250 million development policy loan supports the country’s significant achievements and further actions in reducing the public sector deficit and debt by strengthening tax administration, improving budget execution and fiduciary performance, and strengthening the finances of the critically important power sector.

In Cambodia, where the Government has announced that the Extractive Industries Transparency Initiative (EITI) process will be part of its Public Financial Management Reform Program, the Bank recently signed a $US14 million IDA grant agreement to support the public financial management agenda.

In Indonesia, a second generation of measures is being developed to combat corruption at the sectoral and project levels. Under the Strategic Roads Improvement Project, the Bank is working with the Government to strengthen fiduciary safeguards, enhance coordination with government agencies including the supreme audit agency and national anti-corruption agency, and introduce oversight by civil society groups.

In China, an investment climate assessment in 120 cities found that cities vary widely in local governance, investment climate, and progress toward achieving a “harmonious society” – the objective of China’s 11th National Five-Year Plan. The report concluded that cities with the weakest investment climates stand to gain most by making their local governments more efficient, transparent, and investor-friendly.

Investing in Health and Human Development

The emergence of avian influenza in south-east Asia in 2003 has placed the region at the forefront of a global response to the disease. Vietnam, where the World Bank assisted in developing the world’s first Avian Influenza Emergency Response Project, continues to inform global practice with a second operation, the Avian and Human Influenza Control and Preparedness Project.  In 2007, Avian and Human Pandemic Influenza operations were approved in China, Lao PDR, and most significantly Indonesia, which continues to experience significant human infection.  Similar operations are also being advanced in Mongolia and Cambodia. 

The region is making good progress in meeting the MDG challenge of providing access to basic education through operations such as the Cambodia Basic Education project, which has a special focus on the poor and under-served communities.  In faster growing Asian economies, such as Vietnam and Malaysia, the focus is on tertiary education as countries seek to enhance their competitiveness in the global economy.

Promoting Sustainable Development

The consolidation of the Infrastructure, Rural and Social Development units in 2007 into a single Sustainable Development Department underscores the Region’s commitment to respond to client demand for more integrated assistance in these areas.  Notable operations this year addressed complex multi-sectoral issues such as sustainable urban expansion in China through the Sichuan Urban Development Project and in balancing demand for transport services with environmental concerns (Hanoi Urban Transport Project).  In natural resource management, the Guangxi Integrated Forestry Project aims to introduce sustainable management of forestry resources to a country which has significantly increased forest cover but which continues to face growing demand for timber.  In Mongolia, the Renewable Energy for Rural Access Project (REAP) will help provide off-grid rural herder populations with access to regular and affordable electricity.

On climate change, the Carbon Finance portfolio, which grew rapidly in the last two years as a result of China’s participation, is providing $3.7 million to support research and policy work across the region. One of its projects is in Kiribati – a low-lying Pacific Island state – where the Bank is working with the Government to adapt to risks from storm surges and sea level rise. On the larger scale, a study titled Sustainable Energy in China – The Closing Window of Opportunity, proposes a path toward a comprehensive energy policy as the Chinese economy continues its rise and energy demand rapidly builds.

Building Partnerships
 
The Bank has strong relationships with other regional donors, including AusAID, the Netherlands, JBIC, ADB, and DfID.   Multi-donor trust funds have been used successfully for unanticipated needs like Aceh’s reconstruction, avian influenza and the 2006 Yogyakarta earthquake. The East Asia and Pacific region is the largest user of trust funds in the World Bank, with the portfolio standing at $2.6 billion in FY07.

Fostering Participation in Development

In an innovative study released in August 2006, the Bank highlighted the need to give unskilled workers from the Pacific Islands access to seasonal employment in neighbouring developed economy labor markets. The report, titled “At Home & Away: Expanding Job Opportunities for Pacific Islanders Through Labour Mobility”, advocated greater mobility for unskilled workers from the Pacific Islands to help overcome the challenges the region faces because of small economies, remoteness, growing youth populations, and low jobs growth. After the report was released, the New Zealand Government announced that it would participate in a pilot temporary labour mobility scheme with a number of Pacific Island countries.

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Updated October, 2007

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Media contacts:  

Elisabeth Mealey (202) 458-4475 emealey@worldbank.org

Mohamad Al-Arief (202) 458-5964 malarief@worldbank.org